For some it may be a relief, for others a disappointment – the era of printed financial reports is not (yet) over. There will continue to be freshly printed copies that end up in the hands of stakeholders – sometimes purely informative, sometimes aesthetically designed, sometimes cross-medial.
However, neither national nor international accounting has been spared by digitalisation. As of 1 January 2020, the Commission Delegated Regulation (EU) 2018/815 requires “[…] companies whose securities are admitted to trading on a regulated market within the EU” to prepare their consolidated financial statements in accordance with the European Single Electronic Format (ESEF). This is based on the eXtensible Business Reporting Language (XBRL), an XML-based markup language for the electronic data exchange of company information. It is an extension of the IFRS Taxonomy, which is readable by both humans and machines. This means that the content can be read in any web browser, thus promoting transparency and comparability of financial reporting by listed companies within the European Union.
ESEF relevant for audits starting from 2020
For the time being, the ESEF regulation only applies to the publication of the balance sheet, the statement of comprehensive income including profit and loss (P&L), the statement of changes in equity and the cash flow statement, all of which must be tagged in an XHTML file using an Inline XBRL file. You can find detailed information about this in the ESEF handbook here. But be careful, auditors are already checking for ESEF implementation!
English or XBRL? Both “languages” have their place
Annual reports have had international significance for a long time – and XBRL is nothing new either, but due to the ESMA regulation it is more relevant than ever, especially for issuers. According to the “Online Report Perspectives” (German language) study by mms solutions in cooperation with the Center for Corporate Reporting and the Center for Research in Financial Communication at Leipzig University, 97% of annual reports in Germany are published in both German and English.
Linguistically speaking, English is thus an essential component of the annual reports of listed companies in Germany. But also in non-English-speaking countries – as Edward Vick, CEO of EVS Translations, pointed out in his presentation “The Arrogance of the English” in 2010: “In Germany, England and France for example, annual reports in English are mandatory”. The new requirement to publish annual reports in the XML-based markup language XBRL, making them both human- and machine-readable, adds another linguistic feature. Both the foreign-language and the computer-linguistic components will remain an integral part of report publications in the long term. The ESEF regulation thus increases the linguistic requirements profile for participating authors, reporting agencies, translators and language service providers.
EFES Implementation Act, HGB Taxonomy and Federal Gazette in Germany
The ESEF Implementation Act or the “Act on the Further Implementation of the Transparency Directive Amending Directive with Regard to a Uniform Electronic Format for Annual Financial Reports” also came into effect in Germany on 19 August 2020 (German language). Accordingly, there is also an HGB Taxonomy in accordance with German law, which is being developed by XBRL Deutschland. Although the design plays a minor role, according to XBRL Deutschland e.V.* “[the data] can be designed as desired with the new Inline XBRL standard […] in terms of appearance, without affecting automated processing”. This does not affect the obligation of German companies to publish or file the annual report in the Federal Gazette under certain circumstances. XHTML must still be used for individual financial statements. Consolidated financial statements in accordance with IFRS must now contain XBRL tags in the XHTML document using Inline XBRL.
About EVS Translations
EVS Translations has been providing companies listed on the DAX, MDAX, SDAX and TecDAX indices as well as many non-listed SMEs with both general financial translations and annual report translations from German into English (but also out of and into other languages) for around 30 years. Protecting your data is particularly important to us. At the same time we support you in converting your annual reports from Word, Excel, PDF or DTP files into a format suitable for the Federal Gazette.
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By telephone on +49 69 82 97 99 99 or via our contact form.
**The German original of this article titled “XBRL – die neue Sprache der Geschäftsberichterstattung?” can be found here.
Sources and further reading:
*https://de.xbrl.org/taxonomien/ (German language)
https://publikations-plattform.de/sp/i18n/doc/D008.pdf?document=D3&language=de (German language)
https://www.haufe.de/finance/jahresabschluss-bilanzierung/digitalisierung-von-finanzberichten-esef/esma-bericht-fuer-welche-unternehmen-gilt-der-neue-standard_188_455364.html (German language)
https://www.bundesbank.de/de/service/meldewesen/bankenaufsicht/formate-xbrl-und-xml-/formate-xbrl-und-xml-611772 (German language)